Review of farm input taxes a major misstep

Nation Media Group

The government needs to stop flip-flopping on its policies to boost agricultural production and tame the skyrocketing cost of living and create jobs.

In a price shocker in the Finance Bill 2023, the Treasury proposes to change the value-added tax (VAT) status of inputs and raw materials used by manufacturers of pest control products and fertilisers from zero-rated to exempt.

While VAT will not be levied on farming inputs, manufacturers will be forced to absorb or pass on the cost of unrecovered input taxes to farmers, worsening Kenya’s position as the most expensive for farmers in the region.

Agriculture is a risky and unpredictable business, with farmers facing a myriad of challenges from weather fluctuations, pests and diseases.

In the last two years, the sector, which remains the backbone of the job market, has seen negative growth primarily blamed on drought.

Taxes on inputs only add to the cost of production, higher food prices, and increased poverty. It could also lead to reduced investment in the agricultural sector, including new technologies.

The State should desist from quick and easy ways of generating revenue and instead focus on policies and measures that include moving the sector into an irrigation-led, mechanised future that promotes sustainable agriculture, increase productivity, and food security for all and creates jobs.

The MPs should not pass this Bill before reversing this proposal to protect the sector from short- and long-term detrimental consequences to the entire agricultural industry and the economy.